Wide-ranging reach: Univision’s Edgar Martinez goes on-air during the Spanish-language network’s broadcast of the 2014 World Cup at a studio in Rio de Janeiro to keep America's growing Hispanic population up-to-date during the once-every-four-year global event.
LIANNE MILTON
NYT

Wide-ranging reach: Univision’s Edgar Martinez goes on-air during the Spanish-language network’s broadcast of the 2014 World Cup at a studio in Rio de Janeiro to keep America's growing Hispanic population up-to-date during the once-every-four-year global event.
LIANNE MILTON
NYT

Univision’s IPO uncertainty

The public brawl between Trump and Univision Communications, the country’s largest Spanish-language broadcaster, escalated last week after Trump, a Republican presidential candidate, ejected the Univision news anchor Jorge Ramos from a news conference. Already, Univision is fighting a lawsuit brought by Trump after it dropped its telecast of the Miss USA pageant after he made disparaging remarks about Mexicans. (Trump is a part owner of the Miss Universe Organization, which produces the Miss USA pageant.)

But more troubling for Univision are questions about its business prospects ahead of its planned initial public offering this fall. The shares of major media companies have recently taken a hit because of worries over sharp declines in ratings and weak advertising sales — and the fact that consumers are abandoning cable and satellite TV subscriptions. Univision also faces increased competition from its rival Telemundo and English-language network programming aimed at Hispanic viewers. These issues, combined with the recent stock market convulsions, now have some industry executives and Wall Street analysts questioning the timing and the prospects of Univision’s IPO.

“The challenges facing TV-based media companies are growing by the day, with the lack of visibility increasingly concerning investors and making valuations difficult,” said Rich Greenfield, an analyst with BTIG Research. “The question is: Can anybody flourish as the media tide goes out?”

Univision’s financial backers, having owned the network for nearly a decade, are anxious for an exit. In 2007, at the height of the private equity boom, a group of investors, including the billionaire Haim Saban and the buyout firms TPG and Providence Equity Partners, paid $13.7 billion for Univision. Last year, its owners held preliminary talks with Time Warner, CBS and Viacom about a potential sale. But, among other issues, the media companies were turned off by Univision’s $20 billion price tag and its $9 billion debt load, according to people familiar with the discussions.

Since no deal materialized, Univision is now pushing ahead with plans for an IPO, according to one person with knowledge of the plans who requested anonymity because the details are private.

“What Univision needs to do is tell people that their businesses are different and better than conventional wisdom thinks traditional media businesses are today,” said Michael Nathanson, a media analyst with MoffettNathanson Research. Investors are concerned that the traditional broadcast networks will continue to lose viewers as people spend more time watching on-demand streaming television that includes minimal advertising, if any at all.

Univision’s results from the most recent quarter did not provide potential investors with much confidence. The company, which was not profitable last year, reported a loss of $23.5 million in the most-recent quarter. Total revenues declined 16.5 percent during the quarter compared with the same period last year, or just 3 percent when excluding the revenues generated by the World Cup, which Univision broadcast in 2014.

Univision has pitched its stock offering as a chance for investors to capitalize on the booming size and power of Hispanics in the United States. Hispanics now make up more than 17 percent of the American population and, during the last five years, accounted for more than half of the nation’s population growth.

As the country’s top-rated entertainment, sports and news destination for Hispanics, Univision’s Spanish-language media offerings include two broadcast networks, Univision and UniMás; nine cable networks including the 24-hour sports network Univision Deportes; 60 local TV stations; and a smattering of digital and mobile outlets. Univision also trumpets the fact that about 91 percent of its viewers tune in live, a potential draw for advertisers, compared with an average of 65 percent for the top four English-language broadcast networks, according to its IPO prospectus.

The company has also highlighted a series of recent initiatives intended to connect with younger, digital-savvy viewers, including a distribution deal with Netflix and a partnership with Snapchat to create live Snapchat Stories for sports and entertainment events. Univision is also is a partner behind Fusion, the startup English-language digital- and cable-TV joint venture with Walt Disney aimed at millennial audiences.

Yet the company’s long-held dominance on the Hispanic market in the United States has faltered in the face of competition from rival Telemundo as well as other emerging TV networks and digital outlets. Fusion, which began in 2013, has struggled, with losses of $35 million last year. English-language networks have increased their efforts to offer programming that appeals to Hispanic viewers, but questions loom as to whether younger viewers will prefer to watch programs in Spanish.

“One of the biggest obstacles Univision faces is the same thing English-language media companies face: The market has gotten a lot more fractionalized,” said Brad Adgate, senior vice president for research at Horizon Media, an ad-buying group.

The ratings gap between Univision and Telemundo has narrowed in recent years, especially during the prime-time slot valuable to advertisers. Ad buyers said that Telemundo emerged as a stronger competitor with its gritty, violent narconovelas that provided an alternative to Univision’s more traditional Cinderella-story, melodramatic telenovelas.

A change in how Nielsen measures viewers — a move intended to better represent the changing demographics of the country — could result in a slight decline in total ratings for Univision and a slight increase for Telemundo, according to executives with knowledge of the change.

Lia Silkworth, managing director of Tapestry, a multicultural marketing group of Publicis’ Starcom MediaVest Group, notes that while Univision remains the dominant player in the market, Telemundo is shaking things up.

“There is absolutely no doubt today that there are more choices in Spanish and in English to reach Latinos than there have ever been before,” Silkworth said. “I do see that continuing to increase over time.”

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